A Magic Formula for the Enforceability of Premarital Agreements?

Assume Enforceability

Everyone wonders whether premarital agreements are enforceable.  The answer must be “yes” unless specific contract or statutory defenses can be proven.  There seem to be urban legends about the lack of enforceability of these agreements, but there is no doubt a court is going to presume the agreement is enforceable.  The case of In re Marriage of Friedman (2002) 100 Cal.App.4th 65, 122 Cal.Rptr.2d 412, probably summed it up best when the court of appeal upheld the validity of a postnuptial agreement and stated: “Judicial erasure of a competent adult’s signature on an agreement does not serve the purpose of the law of contracts, i.e., to protect the reasonable expectations of the parties.”  California’s court of appeal has concluded the same in our most recent installment in the law on premarital agreements.

State Your Wealth, Offer Disclosure, Obtain a Waiver

In the case of In re Marriage of Hill and Dittmer (2011) 202 Cal.App.4th 1046, the court of appeal upheld the enforceability of a premarital agreement on various grounds, the most interesting of which concerns the adequacy of one’s disclosure of his or her wealth and the obligation of individuals to investigate the other person’s financial conditions when offered the opportunity to do so.  Also, the case is a reminder to be very careful of the “boilerplate” waivers in premarital agreements – they are actually enforceable.

The case of Hill and Dittmer involves very two very accomplished, smart and successful individuals.  The court describes Sandra Hill and Thomas Dittmer as follows:  “Prior to the marriage to Dittmer, Hill had been an editor of Mademoiselle and Brides magazines, and authored articles for Vogue, Allure, Traveler, Conde Nast Publications, USA Today, and NBC News. In addition, she had her own television production company; was president of ‘In Fashion,’ a division of RJR Nabisco; was the spokesperson for DuPont Lycra; and was a published author. All of these were high-pressure jobs which required that deadlines be met and contracts reviewed, edited, and signed. In sum, Hill is, by any measure, an accomplished business person who achieved enormous professional and economic success. Dittmer was every bit her peer. He was founder and principle [sic] of Refco, a major independent commodities trading company.”  Dittmer wanted a premarital agreement; Hill agreed and her attorney prepared all drafts of the agreement.  The final agreement stated that Dittmer had “an approximate net worth of $40,000,000” and that Hill had an “approximate net worth of $10,000,000.”

In addition to this disclosure of wealth, Dittmer provided Hill’s attorney with full and complete access to Dittmer’s financial information and an opportunity to consult with him, any of his accountants and other representatives as to the nature, value and cash flow from any of his assets and the nature and extent of his liabilities.  Despite this offer, Hill did not seek any financial disclosures from Dittmer. This was Hill’s ultimate mistake.

During the divorce, Hill sought to prove that Dittmer significantly understated his wealth.  Hill contended that this misrepresentation made the premarital agreement invalid.  The trial court and the court of appeal disagreed with Hill because Hill expressly waived any further disclosures by Dittmer and she did not take any steps to obtain financial disclosures from Dittmer during the negotiation period, although she was invited to do so by Dittmer’s attorney.

The Lesson

So, once again we see the courts upholding a premarital agreement.  This case appears to support the proposition that once an individual has made a disclosure of wealth – even a statement of approximate net worth – coupled with the opportunity to investigate that person’s financial circumstances and a waiver of further disclosure, it is sufficient to prevent the agreement from being found to be invalid on the grounds of a misrepresentation of wealth.  The appendix of the Hill and Dittmer case sets forth the provisions of the premarital agreement which resisted challenge and may just be part of the magic formula for enforceability.